Statement by an IMF Staff Mission to Paraguay

Mr. Alejandro Santos, mission chief of the International Monetary Fund (IMF) to Paraguay, issued the following statement today in Asuncion:

"A short visit of staff from the International Monetary Fund (IMF) continued discussions for the 2006 Article IV consultation and for the second and third reviews under the Stand-By Arrangement (SBA), approved by the IMF Executive Board in May 2006. The mission met with Finance Minister Ernst Bergen, Interim President of the Central Bank, Venicio Sanchez, and other senior officials.

"The broad macroeconomic objectives of the authorities' program for 2006 were achieved despite an uptick in inflation in the last quarter. All quantitative targets under the program were observed. Economic growth is estimated at 4 percent, surpassing the program projection of 3½ percent. While headline inflation rose to 12½ percent, underlying inflation (i.e., excluding fruits and vegetables) fell to 7 percent, coinciding with the program objective. Fiscal discipline was preserved and the public sector achieved a small surplus against a program target of overall balance. The external situation remained strong, with international reserves reaching a record high and the guaraní strengthening against major world currencies.

"Significant progress was made in implementing the ambitious structural reform agenda. However, there have been delays in implementing two structural measures due to technical difficulties (i.e., preparing amendments to the banking law and related regulations to address remaining weaknesses in the regulatory and supervisory framework of the banking system and designing a strategy to strengthen the financial position of the Central Bank).

"The staff expects to conduct the final assessment of these reviews in Washington in the coming weeks.

"The mission would like to thank the authorities and the citizens of Paraguay for their hospitality."